Tuesday, 30 March 2010

In light of the recent RICS survey revealing that more letting agents expect rents to rise over the next three months, landlords are being urged to rigorously vet potential tenants before handing over the keys.

According to the latest RICS residential lettings survey, which covers the three months to January 2010, more surveyors reported a rise in rents than a fall. This follows five consecutive quarters of negative readings.

The expectation for achievable rents also rose with 33 per cent of respondents believing rents will rise over the coming quarter compared to just 22 per cent last quarter.

Similarly FindaProperty’s Rental Index for March revealed rents have risen for the second consecutive month and are now £16 pcm higher than in January at £820 pcm. According to the survey the firming of rents has been underpinned by a reduction in the availability of rental properties on the market, which are now at the lowest level since October 2008.

Managing Director of HomeLet John Boyle welcomes the increase in rents which he hopes will increase yields and encourage more people to enter the buy-to-let sector as well as help alleviate the widely anticipated shortage in rental properties.

However he says increases in rent asking prices could also cause problems for landlords further down the line.

“If rental prices continue to increase owing to the decline in supply of both flats and houses in the marketplace, people looking to rent may not be able to afford to do so or may struggle to make their monthly rental payments,” said John.

“For that reason I’d advise landlords to make sure they know exactly who they’re letting their property to. Tenant referencing is a crucial area that is often neglected. Yet it can be the single most significant factor in protecting letting agents and landlords from tenants who can't or won't pay the rent.

“Even the best tenant on paper can fall on hard times, especially in the current financial climate. As a tax-deductible premium Rent Guarantee insurance therefore will guarantee you receive the rent you are expecting from your property regardless of your tenant’s personal circumstances or ability or willingness to pay the rent.”

Unfortunately rental arrears are still a real threat for many landlords. In 2009 HomeLet paid out £3 million in Rent Guarantee insurance claims compared to £2.8 million in 2008, which is an increase of over 7 per cent.

HomeLet’s Rent Guarantee policies, which are available through their approved letting agencies (of which there are around 3,000 nationwide), will cover the rent for either six or 12 months. They also include legal expenses to evict the tenant for non-payment of rent and depending on the policy can provide additional cover once vacant possession has been obtained and a new tenant is being found.